Environment and conflict in Sudan

I've moved to the Sudan... and I'm sitting under a fan in Khartoum writing this... I've now been here a couple of weeks and am no longer totally lost. I've a new job as the UN Environment Programme (UNEP) Representative for Sudan. We hail from UNEP's Post-Conflict and Disaster Management Branch, which addresses the links between environment (or more specifically, 'natural resources') and conflict.

The Sudan programme has had a fantastic start through a two-year project to create a Post-Conflict Environmental Assessment for Sudan, which was published this year and is one of the best surveys of the challenges of a developing country environment you will find anywhere - a tribute to the energy and drive of Andrew Morton, who led the effort. The assessment develops some 85 recommendations, and our job here is to make as much of that happen as we can.
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Asking the wrong question - biofuels

I don't want to do a full scale critique of biofuels - not least because that would be to enter an already crowded field [see Biofuelwatch and Global Subsidies Initiative, for example]. But it's worth looking at how narrowly-focussed, bottom-up policy-making now means we have somehow put the most financial support into the worst ideas...

Instead of asking how to reduce transport emissions from road fuel substitution, we should be asking how to make use of land to tackle climate change in the most effective way possible. In coming up with the biofuels targets, policy-makers have asked, and answered, the wrong question. It's not hard to see why... transport policy-makers have to find transport policies. The results: waste, damage and lost opportunities to do better...
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Don't ditch the Kyoto Protocol

My otherwise peaceful morning slumber was disturbed by a radio interview announcing that social scientists Steve Rayner and Gwin Prins want to 'ditch the Kyoto Protocol'. In a Nature commentary, Time to ditch the Kyoto Protocol, they have a go at the Kyoto Protocol and claim that 'political correctness' is inhibiting proper criticism and unnamed Kyoto supporters insist that Kyoto must remain the only game in town, sternly admonishing any dissenters to this orthodoxy. Luckily for us these fearless academics are ready to speak out. The trouble is, they have nothing much to say!

Yes, it is true that current efforts to control greenhouse gases are inadequate and that emissions are still rising and accelerating when they need to be slowing and falling - see chart [data from CAIT] - see also BBC item. So we do have prima facie evidence of failure. Or more optimistically, it's too early to see success in a multi-decade effort. But any failure so far is a reflection of insufficient political will and its wicked uncle, human short-termism, rather than the design of the Kyoto Protocol.
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Severn barrage - flawed economics

Note: this follows an earlier posting on: The case for the Severn barrage - does it hold water?...

Sometimes you can be wading through a report and hit something that abruptly tells you it isn't really worth reading on: the report is mad and you are wasting your time. And so it happened when reading through the SDC report Tidal Power in the UK, and coming across Table 33 on page 119 - see left.

This shows the cost of the Cardiff-Weston Severn barrage for different discount rates (the horizontal lines), compared to other low carbon technologies (the bars). The report declares:

...at an 8% discount rate, [the barrage options] lie at the higher end in comparison to other low carbon technologies; at 15%, they are well above the costs of all other technologies except wave power; but using low discount rates of 2 or 3.5% a barrage becomes highly cost-competitive.

Oh dear...! If you were also to assume a very low cost of capital (discount rate) for the other technologies, they get much cheaper too! So the costs given for offshore wind or nuclear, both highly capital intensive, would be much lower if they had 2-3% discount rates and the bars would shrink below the lines. The chart is distorting and meaningless, but it does rather betray the tendency to appraisal bias that pervades the report. About this there is more to say....
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The Merton Rule - an investigation

Once it was famous only for the '70s Mod-revival band, The Merton Parkas. And, frankly, it wasn't that famous even for them. But now the London Borough of Merton is famous for the eponymous 'Merton Rule'. As the map left shows, local government across the nation [list] is at various stages of implementing the Rule. The Merton Rule is a planning condition requiring on-site generation of renewable energy:

All new non residential developments above a threshold of 1,000sqm will be expected to incorporate renewable energy production equipment to provide at least 10% of predicted energy requirements [Merton council site][Merton Rule site]

The intention is to develop this to residential development over 10 units and possibly to increase the percentage to 20%. But a storm has erupted: the champions of the Merton Rule believe the government is about to put a stop to it in a craven capitulation to the building industry, which doesn't like the high costs of complying and has the government over a barrel on delivering targets for housing growth [see recent Guardian articles: Don't scrap green housing rule, urge campaigners and Green groups warn energy minister against U-turn]. The case for the defence has been developed and a petition opened on the No 10 web site. Let battle be joined!
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Case for the Severn Barrage - does it hold water?

There's speculation in the papers [last weekend's Guardian, earlier in the Independent] that the government is to back the Severn Barrage. This huge project would capture renewable energy in the tidal movement of water in the Bristol Channel - the tidal range is one of the highest in the world: up to 15 metres. There have been various designs and locations proposed, but the leading one is promoted by the Severn Tidal Power Group of major construction companies (see picture left and this 2006 presentation by the group making their case). The Sustainable Development Commission is shortly expected to produce its report on tidal power, and we should have much more data and analysis to consider at that point. But I thought I'd get my own thoughts on this straightened out in advance.

The inevitable question must be: "is this scheme bonkers?" In my view, bonkers would be too strong - but I can't see the case for the Barrage now.
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Land use and food security

One of the big questions for me is whether we devote too much land to farming and not enough to land use for wildlife, wilderness, woodland, places to walk and places to live etc. that is land for its 'amenity' value or for development. About 70% of England is given over to farming and only about 10% to development (see my earlier posting), yet surveys show most people think that much more land (>50%) is developed than really is (see Q1 in this survey for the Barker Review). The survey also shows that people have strong preferences for land for its wildlife and landscape value (Q3).

So, why don't we have more national parks, reforest large areas of rural England, get most of the sheep off the uplands, switch to extensive low impact agriculture producing high-quality and high-value foods, open up access to land, fill the countryside with helpful signposts and paths and let people enjoy living in England? I was out walking in the Thames Valley this weekend - very nice, but I did wonder why there was so much sheep farming going on what must be some of the most highly prized real estate in the land. An occasional sortie out of the city reveals just how much space there is given over to low value agriculture, even in crowded South East England.

The argument that usually comes back is some variation on 'we need domestic farming for food security' or worries about the loss of self-sufficiency in food production. We might become more dependent on food imports, and that would be A Bad Thing. So how credible is the food security argument? Indeed, what exactly is the argument? I think it takes us to the heart of the great debate about land use that there ought to be. In summary, I think the food security argument is entirely bogus, but a key question for land use policy becomes 'how much should we consider the international impacts of what we do domestically?' ...

What is food security?
Most definitions [here][Wikipedia] are based on people having access an adequately nutritious diet. But the concept spans a range from having sufficient calories to remain alive to maintaining affordable choice in the diet - kumquats in January and affordable Piedmont white truffles at all times. Although often expressed in terms of access, food security is really an economic concept - about having the means to buy food, and about being near enough people with the means to create a market. Even the worst famines rarely arise from absolute food shortages, but loss of purchasing power and market failures (See Economist on Niger famine, Amartya Sen, Poverty & Famines) and few people actually starve in a famine - rather they die through infectious diseases. The symptoms of food insecurity are high or volatile prices. We should be clear, food security is first and foremost a problem for the poorest developing countries and for poor people everywhere.

Promoting self sufficiency - but why?
Much is made of self-sufficiency in food production - for some the declining 'self-sufficiency ratio' (see chart above [Defra data Table 7.4]) is a crisis. The National Farmers Union (unsurprisingly) sees it as vital.

In 1996 we produced more of our own food, and for a higher population, than at any time since the mid-nineteenth century. But that level of self-sufficiency has been falling. In the last 10 years, overall self-sufficiency has fallen by 18% and self-sufficiency in indigenous foods by 15%, as a result of lower UK production, reduced exports and increased imports. The figures look stark... [From first page of the NFU's case for farming: Why farming matters - December 2006].

Actually, our self sufficiency depends on how you look at it. The lower chart is derived from the FAO Food Balances' (see here), but presented as calories per head per day rather than in prices. The food balance looks at production, exports, imports and consumption of food and as inputs, such as feed and seed. The self sufficiency ratio is domestic production divided by production + net imports. On this basis, we are 83% self-sufficient in calories. See my Google spreadsheet [XLS], which sets out the food balances for the UK and a few other countries extracted from FAO. The lower chart above summarises the spreadsheet for the UK - it breaks down self-sufficiency into different food groups.

We are self-sufficient in the most important food group in energy terms, cereals. Where we are a net importer, it is primarily for meat (New Zealand lamb, Danish bacon etc) where others have advantages in production, or for things we like but don't grow here (fruit, olive oil). We tend to import higher value foods - but these are to some extent the excitement and choice in our diet, not the raw energy content.

But so what if we do import food?
What would higher self-sufficiency actually do for us? Not much actually. Domestically produced food still gets more expensive when world prices go up - so it doesn't somehow protect our people. In fact we end up at greater risk that pest, drought or some other rural plague will strike down domestic supply. It would matter for the economy if we were a huge importer or exporter and the agricultural sector was a substantial part of the economy - in which case we might worry about terms of trade shocks or other bad things that world markets might do to us. But we aren't, it isn't and we don't need to.

Agriculture accounts for only 0.9% of UK GVA, about £9.6 billion, and it is the small player in the £80 billion UK food industry - food manufacturing accounts for £21 billion and distribution and services, such as restaurants, £49 billion. The agriculture net negative trade balance is £4.9 billion (ie more imports), but this is less than the £6.1 billion net imports of office machinery and computers. We are 22.5% important dependent in agriculture, but 52% import dependent in computers and office equipment. [Source: ONS Input-Output Analysis, 2006]

So should we be more worried about importing food or computers? Answer: neither.

Trade is the basis of food security
Trade enables us to buy more food, more cheaply and with greater choice. A very good report by a team in Defra makes this case extremely well [Food Security in the UK: an evidence and analysis paper]. Strangely this seems to have popped out just before Xmas 2006 - usually a sign that something is to be buried! Maybe it was that it came a few days after the NFU report on Why farming matters.

As the authors say: The conscious or unconscious identification of food security with self-sufficiency has often obscured the real issues... and ... a discourse centred on ‘UK self-sufficiency’ is fundamentally misplaced and unbalanced.

The importance of markets in securing food supplies is well illustrated in charts included in the report (left). For vegetables, countries within the EU have varying self-sufficiency. But the EU is overall almost self sufficient. For fruit, some countries barely grow it all, but the EU meets most needs (but can't grow much tropical fruit). Over time, the EU has become more dependent - but that probably reflects an increasing taste for fruit, lowering tariffs that allow access to lower cost producers, taste for more exotic fruits not grown in the EU.

The point is that markets and trade deliver food security, diversity and resilience in the supply system. The report concludes:

International trade has long been a central feature of UK food supply, and has remained critical even during times of emergency. There is no reason to suggest this will be less in future. At the very least, UK food security is tied up with the EU single market and, ultimately, the efficiency of the world trading system.

I think the big question about land use in England is how much we care about the international impacts of decisions we make about UK self-interest... there are two in particular: the international environmental footprint and the impact of our land choices on the food security of others.

Exporting environmental footprint...
I hope you might be convinced that 'self-sufficiency' in food isn't a worthwhile objective in its own right, and may even be harmful - it certainly has little to do with food security. But what about the argument that we are simply exporting the environmental footprint associated with food production? We could turn England into a pristine green and pleasant national park with all industrial farming removed. But food production, fertilisers, water pollution, biodiversity impacts and all the rest would go abroad.

The first thing to note is that this is absolutely the norm - we do this for manufacturing, mining and other high impact activities. Much of our polluting is done elsewhere. At the heart of this is the theory of comparative advantage and our preferences. Rich English people have a high and increasing preference for good environments (articulated collectively through numerous laws, codes, the planning system). Other countries may relatively favour more aggressive and polluting activities and prefer money raised through production of goods to sell to us. We have traditionally respected this as a matter of 'national sovereignty' and resisted what some would call 'environmental imperialism'.

I think this reluctance to impose extra-territorial standards will and should continue, with an expectation that food standards and costs will rise globally and that more countries will emulate the EU and set high environmental standards as they become more prosperous. But I think there should be one exception to pure national sovereignty - where the impact is on a 'global public good' ie. something we should all bear responsibility for protecting because it's value is global and it has characteristics of a public good. If the system behaved in such a way that for every hectare of land taken out of agriculture in England a hectare was felled in the Amazon or Borneo, I'd be troubled. I'm not sure it would behave in that way, but the challenge there is to develop global collective action to provide global public goods.

PS. we should be very sceptical about 'food miles' arguments (see my earlier posting: Food miles... wrong idea, stop using it!)

Impact on the poorest...
If we use UK land for producing 'non-marketed' goods that we have high demand for (like leisure, views, woodland walks and biodiversity), then we are adding to the pressure on available productive land to meet food and energy needs globally. That doesn't hurt us too much, as we simply buy access to the necessary land through international trade. But does it hit those who are the poorest? To be honest, I don't know...

How it could make things worse...
Pressures on land may grow - fuelled by population growth, economic growth, a tendency to consume more protein with increasing wealth, demand for biofuels and climate change and other pressures degrading the available land. This would be globally serious if agricultural productivity growth (increasing yields per hectare) did not keep pace with these pressures. Land prices and agricultural commodity prices would increase and the poor may be unable to afford sufficient food. In fact, the productive capacity of the land may be globally insufficient to support the world population. The poor would be the inevitable losers.

Why it might easy to overstate the problem...
If land and food became scarce, we might expect those poor countries with agricultural economies to benefit from rising prices - just as oil producers (in theory at least) benefit from rising oil prices. A new green revolution might boost productivity and food production might shift, with perhaps Ukraine and Russia becoming bread-baskets of Europe, for example. As prices rise, there may be reconfiguration of the diet - perhaps with less resource-hungry protein consumption. Famine is rarely caused by absolute food shortages - and there is unlikely to be a global food shortage in absolute terms. Richer poor countries would have a better grip on their food security.

The international consequence are a critical question for land-use strategy
As I suspect is apparent, I'm not really sure how the international consequences of domestic land use choices would or should really play out. But what I am sure about is that these are critical questions for a future land use strategy. At the moment we generally do not act on these consequential impacts (in fact we usually wilfully ignore obvious damage caused by key farming policies like the CAP). But is this hard-headed and basically right, or does it belong to a pre-globalisation era of narrowly defined national interest?
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When rich countries make emissions cuts in poor countries

Yvo de Boer, head of the UN Framework Convention on Climate Change (UNFCCC) argues that richer countries should be able to buy as much as all their emissions reductions through investments in emission reductions in developing countries [see BBC / interview]. Given the global atmosphere is indifferent to where on the surface the reductions take place, there is an argument that countries with obligations to cut should make the emissions cuts where it's most cost effective. As long as the rich countries do the paying, then they would not be shirking their responsibilities. Or so the argument goes. And this argument is more plausible than its critics admit - the polluter is still paying, but in theory paying where the cuts are most efficient and thus squaring equity and efficiency objectives. However, the argument is also wrong. The main problem is long-term structural change...
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Escaping the reckless EU renewables targets

The Guardian exploded with indignation this week [Revealed: cover up plan on energy target; leader; letters], at the discovery of a leaked government memo discussing how the UK might wriggle out of a European Union renewables target - to reach 20% of EU energy consumption from renewables by 2020. In fact, the real story is different and more worrying than the Guardian has it. The real problem is how this target ever was agreed in the first place and the negative consequences for climate change that will flow from it. It might seem counter-intuitive to see a highly 'ambitious' renewables target that way, but I think these targets an own-goal that will discredit the EU, cause negotiating sclerosis, distract from more important objectives, and fail to deliver what would in any case have been the wrong approach, whilst missing renewables targets for 2010 by miles. I think this is bad policy and the civil servants are right to be looking for a way out, so let me explain why...
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Urban flooding - 15 things to do

We've had some horrible urban flooding impacts recently. But the outlook is pretty bleak too - the chart is from the 2004 Foresight Report Future Flooding, showing both potentially high future costs (rising from £270m to up to £15 billion) and large uncertainties involved. Now we have been reminded how bad it can be, what's to be done? Let me set out some views on the problem, which is far from straightforward and little to do with flood defences, and then 15 ideas for how to respond...
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Is the UK flooding down to climate change?

As an employee of the Environment Agency, I am increasingly asked "what an earth is going on with all this flooding?".

Is climate change to blame?
Maybe, but only maybe - and maybe not. There has been highest rainfall in parts of England since records began in 1766 (Met Office stats), but many have leapt in with rather more certainty than is justified to attributing this to climate change - citing the usual formula (to paraphrase) that "no single event can be attributed to climate change, but this is consistent with the predictions".

Actually the picture is far less clear than even this. Whilst the global picture on climate change is ever clearer, characterising climate change impacts at small geographical scale (ie. English regions or cities) is very difficult. This is done by the UK Climate Change Impacts Programme (UKCIP). In the most recent (2002) UKCIP assessment, Climate Change Scenarios for the United Kingdom, the modelling finds more intense rain in the winter, but that:

Intense rainfall events become rather less frequent in summer just about everywhere. (p. 55)
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Emissions trading - notes on a scandal

Another day, another broadside against carbon emissions trading. The FT's Martin Wolf offers advice to the new Chancellor, including:

While simplifying tax, he should also take a close look at green taxation. Simple taxes that apply across-the-board are what is needed. The grant of valuable rights to big polluters through systems known as “cap-and-trade” is a scandal. [here]

This is an increasing theme, with even American giants like Alan Greenspan and Paul Volker coming out against cap 'n' trade and in favour of a carbon tax [see article]. I have to say I'm ever more swayed by this view, see my posting To Cap or to Tax.

But is the EU system 'a scandal', as Martin Wolf says? You can certainly make the case - the permits are given away to businesses, but they are valuable because they are scarce 'property rights' - the right to use the atmospheric sink for carbon. It's hard to put an exact value on these permits - see charts of the market price for EU allowances from Point Carbon showing the collapse of price in 2007 but a steady price of about €20 so far for the future price of 2008 EUAs... but in total they are worth a great deal.

€billions for what purpose?
So if, say, €20/tCO2 is used to give an illustrative value of the ETS price, the value of the rights to emit over 200MtCO2 to UK industry comes to over €4.3 billion. To the power sector alone, it comes to €2.7 billion (see numbers in this Google spreadsheet based on 2005-06 ETS results [XLS]. The power sector is especially annoying because it actually passes these costs on to the consumer, even though it doesn't actually pay for the permits, which are mostly given away in the EU system. They have adopted this as an accounting convention, reflecting the opportunity cost of holding the allowance for each unit of electricity sold. They can pull this trick off because they are an oligopoly and don't face competition from producers outside the system. So even allowing for the permits that they have to buy because they are given fewer allowances than they need, the power companies profit from this by €1.8 billion... and the bigger and dirtier they are, the more they make, because allowances are given to them in proportion to their historic emissions! What exactly is the public purpose served by transferring billions from energy consumers to energy company shareholders in approximate proportion to how polluting they are? Is that a scandal? Well you could defend it by saying that it was necessary to get the system off the ground - an argument that works if and only if the system is changed as soon as possible. Alternatively, you could see it as gullible fearful governments and bureaucrats being outsmarted at every turn with the poor public bearing the cost for nothing.

What to do?
This does in fact partially implement the polluter pays principle, in that the consumer is effectively 'taxed' for their pollution through this system because the permit costs are passed on. It's just that the 'tax' revenue goes to the companies not the government - and therefore the scope to do something useful with €4+ billion in the UK is lost. The answer is to auction the permits so that the government gets the revenue. The international competition arguments against making them buy their right to pollute are mostly hogwash and really apply only with force where the industry is energy intensive and highly traded internationally. Excellent analysis by Grubb & Neuhoff summarised by the Carbon Trust, [here] suggest that competitiveness is a minor concern and only aluminium should be a worry. There should be no question of violating the polluter pays principle, options include ideally reaching international sectoral agreements through the Kyoto Protocol or tax adjustments at borders to correct for ETS costs for trade across EU borders.

A novel approach for aviation in the ETS...
My suggestion is to bring as much EU aviation as possible into the system but give the sector no initial allowances at all. This would mean it would have to buy CDM credits or allowances from other emitters in the EU system. This has the equivalent effect of making 'carbon offsetting' mandatory for all flights. It's economically equivalent to taxing aviation and spending the proceeds on reducing emissions in developing countries.

This lot needs to be agreed in time for the third phase of the EU ETS - which starts after 2012, but is under discussion now.
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The irreducible Stern - limerick contest

Are you tired of trying to understand the 600-page Stern Review (eg. this perplexing graph showing a 13.8% loss of GDP in 193 years from now!)? Luckily, the government's finest minds are rumoured to be preparing a simplified version in limerick form. Here's my effort:

Warming will cost twenty per cent
But stopping it will barely dent
The world’s GDP
Or its security
So it must be money well spent

As must be obvious, poetry was never a strength - and that probably isn't even a limerick. So I'm sure others can do better... Please submit entries as comments to this blog posting and forward to any talented colleagues. If we get enough, I'll ask the great man himself to judge. Haiku also accepted.
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To cap or to tax?

I ended my last post noting some recent critical commentary from the FT and Economist about emissions trading being an inferior approach to a carbon tax. Here they are again....

+ FT - Undercover Economist: Emission impossible 13 April
+ Economist - Cleaning Up - 31 May
+ Economist - Business and climate change - 31 May
+ Economist - Doffing the Cap - 14 June
+ Prospect - The Cost of Carbon - July 2007
+ Martin Wolf - advice to the new Chancellor - July 2007

The main virtue of the tax approach is the predictability of the cost and impact on business. Environmentalists would usually cite the predictability of the environmental outcome as a major benefit of cap & trade schemes. But that overlooks an important problem with cap setting - that when costs are uncertain, politicians and loss-averse bureaucrats, with will listen to the pleas of business or believe they can game the system for national advantage and will set caps at strongly a risk-averse level - ie. they will sacrifice the environmental outcome in return for confidence that there will not be unexpected price spikes.

There are other reasons to be more wary of cap 'n' trade...


Leakage to uncapped systems
A brutal report on the EU Emissions Trading Scheme by WWF Emission Impossible for Carbon Trading, showed that the level of project credits from the Clean Development Mechanism would be sufficient to meet between 88% and 100% of the 'effort' (ie. difference between business-as-usual and the caps set for 2008-2012). But the CDM attracts and deserves criticism for offering supposed greenhouse gas savings with dubious additionality (ie. that wouldn't have happened anyway) at very low cost. The bias in the CDM is extraordinary - just over 50% of project credits [source: UNEP/Risoe] so far relate to closure and conversion of HFC-23 factories, mostly in China.

Leakage to weakly capped systems
The is much excitement in government about increasing coverage of emissions trading, as this is somehow an end in itself. It isn't. In fact, it just allows over-allocated caps to be distributed for everyone's ease of use and at a profit for those receiving the allocation. This view was uncritically encouraged by the Stern Review [see chapter 15, for example, "To reap the benefits of emissions trading, deep and liquid markets and well designed rules are important. Broadening the scope of schemes will tend to lower costs and reduce volatility."] Yes, but... what if these markets are not similarly constrained? It would be just about okay if three conditions were met: first, these were all markets created under a Kyoto protocol negotiation - reflecting a political settlement of atmospheric property rights. Second, that there was a high level of confidence in compliance (ie. there wasn't a lot of money changing hands for permits and then no consequences for going over budget. Thirdly, that consistent rules for allocation were used across the system: ie. preventing gaming, state-aiding, trade distortion and political favouritism. Then who could argue with a right to trade within this political agreement? But nothing like this exists.

Poor carbon price signal for long term investment
Bureaucrats have been confused about the purpose of the EU ETS - it is there to allow a fairly short-term emissions cap to be met with reasonable economic efficiency. It doesn't plausibly give an adequate long term carbon price signal - the future price depends too much on future caps, future rules (eg. proportion of CDM allowed), future scope (eg. will aviation be in?), future participants etc etc Great volatility is already evident (see price history) - but almost all is in response to political decisions, rather than 'fundamentals'. I think this would be better done by a government or EU collectively announcing that it will place an economy-wide minimum tax on carbon of €30/tonne and that it will never let the carbon price fall below this level, with an expectation that it will rise over time towards the social cost of carbon. This could not be binding on future governments, but I think it would be possible to get (present day) political consensus, and once in place it would be hard to abolish ...and who would want to?

High transaction costs
You only have to look at the scale of the conference industry, bureaucratic expenditure, trading platforms, market makers, traders and speculation built up around carbon trading to see how wasteful it is as a way of achieving so far quite modest objectives. If all the energy going into trading was focussed on how to get emissions down to do well in the system then i wouldn't mind, but that hardly warrants a mention in most forums in which cap 'n' trade is discussed.

Profiteering
UK power companies have shamelessly added the 'opportunity cost' of the permits they have been given free to their electricity tariffs and passed the cost on to the consumer. The economic idea is that were it not for the consumer, they would have these to sell and make money, so the consumer should pay - and the money goes straight to the bottom line. It pains me that King and Big power are making money from the efforts to control climate change. Of course, only oligopolies can pull stunts like this. This is however not an inherent weakness of trading - it just means we should move to auctioning as soon as possible so that the government captures the value of scarce property rights and can use the revenues for worthwhile things (tackling fuel poverty, responding to climate change in developing countries, investing in future technologies etc) - not enriching E.ON or RWE shareholders for no reason at all.

Special pleading
UK has decided to let all the cuts be taken in the power generation sector and has allocated all other industries their 'business-as-usual' emissions? The power sector does not do significant international trade and can pass costs on to consumers, but all other industries are getting a kind of state aid - and because it is the EU countries are competing to feather bed-their industries.

Having said all that...
The EU emissions trading regime is actually in place whereas a carbon tax isn't and isn't likely to be any time soon. The fudges and compromises of the ETS have been done to get something off the ground. This is where the bureaucrats and politicians trump the economists - they have made something work (albeit imperfectly) and now have the task of improving it - which they are steadily doing. The economists first told them the tax and trade systems were equivalent (because they have no idea about getting things done in imperfect conditions and without absolute power) and now say "we told you so" when the difficulties are becoming more obvious.

So, I favour...
For the EU ETS ...maintenance of the EU ETS with: tougher caps; central cap setting; as much auctioning as possible (probably all but the aluminium sector); use of international project credits restricted to no more than 30% of the emissions reduction 'effort'; pan-European sectoral cap setting (with a view to achieving global sectoral agreements eventually through the Kyoto Protocol); transparent output-related benchmarks to allocate allowances where auctioning is not used, inclusion of more sectors - including aviation... so there's a big reform agenda for the EU ETS. For countries that don't yet have an ETS, I think the economists are right and they can get a carbon tax in place, that would be better in the early stages of developing a response to climate change.

and...
even where we have the ETS, I think we need a new commitment to introduce an economy-wide carbon price floor through a carbon tax, with a government and hopefully cross party commitment that this will never be less than €30/tCO2. This would have several functions: to set a minimum carbon price expectation for the long term; to raise revenue for good deeds or to displace taxes on employment or investment; to be an adjustable instrument that could be turned up if it looks as though the UK is about to mis one of the 5-year emissions budgets in the new Climate Change Bill. This would both reduce emissions through a price effect, but would also be used to purchase international project credits to make up the shortfall and, if dependence on international credits becomes excessive, to supply a carbon reduction fund that would be used to reduce domestic emissions through an auction of the fund to bodies able to make additional emissions reductions.

Perhaps that sounds like sitting on the fence - but perhaps it's just pragmatic.

Also see Caspar Henderson: Tax not trade.
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Energy white paper - nuclear muddle continues

On May 23rd we had a new Energy White Paper and a new Planning White Paper. Both part of the government's efforts to bring forward new nuclear power stations. The new energy policy makes a case for nuclear on energy security and climate change grounds. In fact nuclear dominates the energy white paper and is the unannounced presence in the planning white paper. But this obsession is out of proportion to the importance of nuclear power in the energy mix - see chart [data]. The government's economic appraisal released with the white paper suggests that not much will happen for the next 20 years anyway:

It is likely that the first new nuclear plant could be added by around 2021 [...] A programme to add 6 GW of nuclear new build by 2025 would not increase the total stock of nuclear capacity relative to the current level.

At the heart of UK energy policy there lies confusion and contradiction... let me make some observations:
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What was the question again? ...Green polling examined

There is emerging conventional wisdom that people are concerned about the environment as never before, but are unwilling or unable to do much about it - for example, from last week's Independent... Britons unwilling to change despite climate change. And that's not unusual... but how realistic is it?

First of all, environmental concern isn't at a record high in Britain... Ipsos/Mori's tracker shows a recent spike in concern (upper chart), but this is in fact lower than the peaks in the late 1980s, which I assume were driven by the iconic images of the Antarctic ozone hole. Concern today is still well below defence, crime, the NHS and immigration. My question is whether green polling tells us much about anything. If we look at some actual polls, there are real weaknesses...

I reproduce the lower chart from the Energy Saving Trust 'Green Barometer' [release / report], which is to become a quarterly tracker of environmental attitudes and behaviours (click to enlarge). This tests concern (high), intentions (good), actions taken (mixed) and probes trade-offs, asking what "activities we’re willing to take for the sake of the environment?".

Behind the responses - the personal 'demand curve' for carbon
I think these questions provide arbitrary and difficult-to-interpret perspectives on a fundamentally far more interesting construct - namely people's underlying 'demand curve' for carbon for different purposes.
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Rising emissions - words, deeds and the struggle to come

As one seasoned observer, who must remain anonymous, described Britain's approach to climate change, "we have the best words in the world". And, as an example, the Prime Minister's speeches on climate change really are quite brilliant [example]

So, what is the UK Government doing? We have led the world in setting a bold plan and targets for reducing greenhouse gas emissions.

Last week saw the release of provisional data for 2006. It shows a rise in UK carbon dioxide emissions [announcement] and ministers calling for more action on climate change [release]. What to make of this...?
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IPCC ends the adaptation = defeat argument

There has been a kind of omertà over talking too much about adapting to climate change - to do so would surely be an act of resignation, a distraction from reducing emissions and effectively a 'gated community' mentality by rich countries that would look after themselves and build walls to keep out the poor.

That argument cannot stand any longer. The IPCC 4th Assessment Report on impacts of climate change: Summary for Policymakers makes very uncomfortable reading... documenting climate change already underway and painting a picture of a slow burning apocalypse over the 21st century. One of many impacts it points to is the loss of glaciers: (see chart from WG1 presentation - the units are cumulative contribution to sea level rise in millimetres). The impacts group follows this up with the consequences for water security:

In the course of the century, water supplies stored in glaciers and snow cover are projected to decline, reducing water availability in regions supplied by meltwater from major mountain ranges, where more than one-sixth of the world population currently lives.

A neat statement, but it means drought risk for 2 billion people and rising. For Africa, there are dire warnings - with serious consequences stated for 2020.
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Europe's renewables target

Just looking at the text of the EU Council Presidency Conclusions from 9 March. The bit about renewables is to the left with some scrawl from me. I've already argued that this is a mad way to do policy [Renewables - why is the EU involved?] - it would be more sensible just to set the carbon targets and rigorously enforce those, letting each country decide how to meet its target.

Of course, the real problem now is divvying up the overall 20% target between member states - so-called burden sharing. And I predict chaos! The Council has hinted here at how it will decide - based on existing renewables share and sneakily introducing consideration of nuclear and carbon capture and storage - one assumes giving those member states that have gone down those roads a lower share of the renewables target. But just imagine the problems... the chart below from EU ObservER and its report: State of renewable energies in Europe, 2006 shows the 2005 share of renewable in primary energy (the 2020 target for this now being 20% for the EU as a whole) - click graph to expand.

As we aspire to more than triple renewables share of primary energy (from 6.3% in 2005 to 20% in 2020) and keep up with growth (oh, despite the 20% energy efficiency improvement), can anyone figure out how to do the sharing? Take into account nuclear share, CCS share, existing renewables share (a 100 fold range) - but watch out for countries with big shares based on large hydro because that is limited by available sites, and if nuclear and CCS are a factor, then why not CHP and energy efficiency? And what if there is less incineration, but more recycling, recovery and reuse?

Probably the best comment on this has come from Peter Sutherland, Chairman of BP, interviewed by the Financial Times [article]:

“What we don’t want to see is the agreement at the council turning into Lisbon agenda mark two in terms of massive aspiration and failed delivery,” the BP chairman told the Financial Times in an interview, referring to a 2000 summit that resolved to make the EU the world’s most dynamic economy by 2010.

“Politicians are always quite happy to give promises that affect successors.” Britain’s Tony Blair and France’s Jacques Chirac were crucial to getting a climate change deal but both would be leaving office in months.

Sorry to be so cynical - but I think this sort of EU posturing invites it. ... continues. Read full post.

Climate scientists in epistemological lather

I awoke today to the depressing sound of an eminent climate scientist arguing that other eminent climate scientists were going too far in making alarming statements about climate change. The self-styled purist was gathering at a Sense about Science meeting and was heroically guarding the pristine truths of science from the barbarians of the American Association for the Advancement of Science and their climate change statement. He said he was doing this in order to preserve the trust of the public in the pronouncements of scientists - fat chance. Well he's made a mess of that..! All blown wildly out of proportion in a BBC story and interview in which, Prof Paul Hardacre, the scientist with the gripe, completely failed to explain what he was concerned about. All involved professed support for the findings of the IPCC and Prof Hardacre even said he "agrees with everything in the [AAAS] statement", but didn't like the way it was phrased.
... continues. Read full post.